Chrysler Laps Detroit Rivals With Profit...

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DETROIT -(Dow Jones)- Chrysler Group, the U.S. arm of DaimlerChrysler AG (DCX), rang up its ninth-straight operating profit in the third quarter even as its Detroit counterparts bled billions of dollars in their North American operations.

Chrysler on Tuesday said it posted a $379 million operating profit in the three months ending in September, compared to $265 million in the third quarter of 2004. The company said the profit is wholly derived from automotive operations and gets no contribution from DaimlerChrysler Financial Services.

General Motors Corp. (GM) announced last week that it lost $1.6 billion in North America alone in the third quarter, while Ford Motor Co. (F) said it lost $1.2 billion in the region. Even though Chrysler Group has various sales operations in Europe and Asia that play into its profit and loss equation, its performance hinges primarily on its ability to make money building and selling cars in the U.S. and Canada.

While GM and Ford have seen softer sales in 2005, Chrysler said third-quarter sales were up 12% from the year-earlier period, representing the eighth consecutive quarterly sales increase. Through September, Chrysler registered a 7% increase in sales, while GM and Ford deliveries both declined 1%.

"Despite rising fuel prices, devastating weather events and a difficult market environment, Chrysler Group products continued to deliver quarterly gains," Chrysler President and Chief Executive Tom LaSorda said in a press release issued Tuesday.

Chrysler has found success with several vehicle launches over the past two years, with the 300 sedan serving as the symbol of the company's resurgence in the marketplace.

Chrysler is building significantly more cars than it did a year ago, according to automotive data firm Ward's Automotive Reports, while the company's inventory level has remained nearly flat over the past year. In September, Chrylser's consistency was evident as the automaker posted a 4% sales increase even as GM and Ford suffered 20%-plus declines due to low inventory and the so-called pull-ahead effect of summer pricing programs that brought consumers into the market earlier than normal.

Chrysler has been running the most-generous incentives of any player in the U.S. market in recent months, according to customer research firm Edmunds.com. Chrysler can shoulder the added expense thanks to a cost structure that is reputedly lower than GM and Ford, which came mostly as a result of painful restructuring tactics employed earlier in the decade by then-CEO Dieter Zetsche, who is now running DaimlerChrysler's global operations.

On Tuesday, during an earnings conference call with investors and analysts, United Auto Group Inc. (UAG) Chairman Roger Penske, who runs the second-largest auto dealer group in the U.S., said Chrysler's success is attributable to a variety of things the company is doing right.

"They've had some great products come into the market and they've had cars available to sell," he said, referring to Chrysler's commitment to run consistent inventory levels. "Of course they (also) don't have the infrastructure costs that some of the other manufacturers have from a total workforce perspective."

GM and Ford are battling to contain rising healthcare costs associated with their large blue-collar workforces and pool of retirees. Both companies also face significant costs associated with cutting their payrolls, at the same time as they face challenges related to the financial difficulties plaguing top suppliers Delphi Corp. (DPH) and Visteon Corp. (VC).

Chrysler doesn't have the same problem when it comes to bailing out troubled suppliers, although it did take a minor hit associated with funding bankrupt Collins & Aikman Corp's (CKCRQ) production operations.

Chrysler turned some of its pension and retiree benefit obligations over to the government in the 1980s, when it flirted with bankruptcy under the leadership of Lee Iaccoca and a young finance executive named Robert S. "Steve" Miller, who is now chairman of bankrupt supplier Delphi.

The strong performance of the Chrysler Group helped DaimlerChyrsler post a net profit of EUR755 million in the third quarter. Though down from EUR951 million a year earlier, it exceeded the expectations of analysts, who had been expecting a figure just below EUR700 million.

Shares in DaimlerChrysler traded on the New York Stock Exchange were up 0.2% at $49.83 recently, while shares in other car makers and parts suppliers were down across the board.

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